There’s a metric ton of blog posts about how the copyright system is broken. You can search on Google for “copyright broken” to see. Here, I’ll even give you a link to make it easier. There are also a few proposed solutions out there and now I’d like to throw my own idea into the mix. Because while I see computers and the Internet as having fundamentally broken copyright I see social media as providing a new solution. That new solution is one I call copypay. This solution moves from copyright, where we enforce the author’s rights to make copies of their work, to a new system where we provide a robust platform for voluntary payments and referrals. Yes, voluntary. Read on.

Why We Have Copyrights

First, we have to understand that there is nothing natural about copyrights–it is a complete fabrication that attempts to reward creative efforts. The printing press suddenly made it possible for creative efforts to be financially lucrative but also made copying possible, so copyright laws were created to protect and reward those authors. Yes, this is a gross simplification of copyright history, but it will do.

Copyright grew to include many forms of creative content and different methods of distribution. Some fit better than others, some stretched the law more than others. But it all came down to the raw ability of a creator, with the authority of the state behind them, to shut down that printing press making unauthorized copies of their work. The computer, coupled with the Internet, has essentially destroyed that enforcement ability. All content is now digital or can easily be converted to digital. And then it can be copied, transmitted, distributed, and stored around the world in seconds. Simply put, there are too many printing presses out there to shut down.

Government enforced copyrights started with actually shutting down printing presses. Then it moved to putting enough legal and financial impacts on unauthorized copying to try and uphold the creator’s various rights. And while that still works to some degree today, there is no doubt that the impact of digital content and unauthorized copying is increasing.

But I’m not here to write about piracy. I’m here to suggest that perhaps government needs to rethink what it’s trying to do with copyright.

The primary purpose of copyright is to reward creators. As the printing press and other copying technologies emerged the best way to do that was to control who could make copies. But that ability to control copying is gone. That’s where my idea comes in.

My Idea: P-10-50

What if government switched from enforcing the right to copy and instead provided a platform to voluntarily pay for copies? I call it P-10-50 and here’s how it works.

Fully implemented, there would be no more copyright law. None. I realize this would take time to transition but it’s my idea so I get to play like that, okay?

Instead, the P in the plan stands for Pay What You Want. This is a rarely used model but you’ve seen it plenty of times. Ever see a street performer pass around a hat after their show? That’s Pay What You Want. What I propose is that anytime you consume content you then have the option to pay the author.

Yes, the option.

Read a book or article and if you like it, you pay the author. Download a song and if you’re tapping your feet, you pay the band. Watch a TV show or a movie and if you laughed or cried, you pay the owner. Don’t like it, don’t pay. The content has no restrictions (DRM, etc.) in it–why would it need restrictions since it’s free?

I know, sounds insane. Because the first thing that springs to mind is that nobody will pay.

But that’s not true. There are plenty of small examples (minor bands or creators who have used the model) but only one well known example. Radiohead’s seventh album, In Rainbows, was released using this model. The digital download was free to anyone who wanted it for around two months. At the same time, fans could pre-order a physical box-set of the album that would come out later. While exact figures were not released, the band has said that about one third of the downloads had no matching payment but that overall the average download paid the band 4 pounds (a typical CD in the UK costs 9 pounds at retail). And according to some other estimates released later, Radiohead made more from the digital downloads then they did on their entire previous album.

This is one reason I think Pay What You Want may start to work–people are willing to pay for content but they don’t want to pay what the stores charge them. But that’s ok because right now stores charge too much. Stores have to pay a number of companies that stand between a consumer and the creator. While some of those companies may help the creator (like a record producer can help creatively), many of those middlemen are remnants of the analog age; they were necessary evils in the day when distributing something was actually distributing some thing–a printed or physical object that cost money to copy, distribute, and take up shelf space. But digital production and distribution has brought costs dramatically down for the majority of content.

Bottom line: we’re at a point where you can pay less and give the artist more. Digital content allows you to directly connect with artists in a much more efficient manner.

Granted, the companies that artists work with to distribute the final product spend a lot of money. Record labels, movie marketers, book publishers, etc. But is that money being spent efficiently? A musician will, at the high end, get a 15% royalty rate from a major label. While they may sell less albums without the marketing budget behind them, they stand to make a lot more money like Radiohead by selling directly to their fans.

There are plenty of other, somewhat related examples of content creators cutting out middlemen and making more money. Glenn Beck reportedly made $3 million a year on Fox News before leaving the network–he was set to make over $20 million based on only 230,000 subscribers to his own web-based network one year later. Comedian Louis CK release a DRM-free comedy special via download for $5. He made over a million dollars. It was so successful he just did it again. Granted, these are not Pay What You Want, but it does show that the possibility is there for the fans to pay less while the artist makes more.

Pay What You Want could start as a way for consumers to save money but gradually convert our thinking to one of supporting directly the artists that we appreciate.

Social Media and 10-50

Now, here’s where the rest of the plan, 10-50, and social media comes into play. Digital content and distribution only gets you so far–it connects you with an audience but doesn’t help you build an audience. That’s why we see a lot of struggling artists releasing content for free in the hopes of landing a more traditional deal and turning their passion into a profession. But with so many people now on social media platforms and turning to each other for reviews, opinions, and recommendations, there’s a real chance for artists to completely build a paying fan base from scratch. That’s the 10-50 part of this plan.

Under this P-10-50 plan after you read something, listen something, or watch something, you pay what you want. Maybe a dollar, maybe ten dollars. 90% of that money goes to the artist. The other 10% is reserved as a payment back to the consumer who linked you to the content. Let me break that down.

Say my friend read a book and loved it. She decided to pay $10 for the book, both because that’s a fairly standard amount for e-books (no thanks to Apple, allegedly) and because she wants to encourage the author to write more books. She then posts a link to the book and a review to various sites. I read her review, decide that book is for me, so I download it and like it, but didn’t love it. So I decide to pay $5. 50 cents (10%) of my payment goes back to my friend in exchange for her promotion of the book (and in the hopes that she will continue to do so with other content she enjoys).

The 50 part of the plan is a cap. The most you can ever make back from that 10% reserve is half of what you paid. So if my friend’s post about this book resulted in 25 people buying the book and between us all we paid the author $200, she is not going to make $20. She is capped at $5 (50% of her initial payment of $10). She stands to make back half of her voluntary payment by encouraging others to consume the content and pay something. This effectively turns consumers into motivated promoters.

This also leaves a large bucket of unclaimed money from two sources. First, the people who purchase directly from the author without being referred from a friend (First Purchasers). Second, successful referrers who end up creating more than five times their initial payment (like my friend who created 20x her initial payment–she has contributed an extra $15 to this bucket). This bucket of money could pay for the infrastructure itself necessary to run such a plan (transaction costs, staffing, improvements, etc.). While it’s possible that a private company could enable such a system, I think for it to truly replace copyright it would need to be powered by the government (much like I believe they are needed to address authentication issues). (Or at least forced interconnections like the phone network.)

Why It Works

The idea of digital distribution isn’t new–we already have it. The idea of referral fees aren’t new–there are plenty of affiliate networks that let you earn a percentage of purchases you link others to. But providing a single platform for those payments and a fixed scheme for referrals, combined with a rapidly connected population and social media which connects people in ways that the Web of the 90s did not, could allow us to switch to a much more efficient content system.

I know there are many obstacles to implementing such an idea, not the least of which is how do you wrest control away from all those middlemen who are currently getting paid (although consumers can do that themselves…see Tower Records, Blockbuster, etc.). But I believe this is a plausible way to deal with content in the social media age. Let me give one more example on this point.

The few people I’ve floated the idea by have all brought up what they think is an exception: movies. Unlike books and most music which are not that expensive to produce, movies are incredibly expensive to produce. But most people don’t realize that Hollywood has taken advantage of the middleman system to hide profits for years. There are plenty of examples of this, but the most recent involves a leaked memo that showed how the fifth Harry Potter movie cost $150 million to make, took in $938 million in ticket sales, but ended up losing $167 million on paper. There are many reasons for the loss but the biggest is that the studio will pay another company (owned by the studio) money to distribute the film (check the Negative Costs line on the linked spreadsheet). That amount can be whatever they want and is often enough to claim that the movie lost money while the studio makes money. Probably the only movie that even Hollywood couldn’t hide all the profits over the last 20 years was Titanic, yet Hollywood continues making movies.

So would P-10-50 work for a Hollywood movie? Let’s try one like The Avengers.

P-10-50 Assemble!

The Avengers has done quite well for itself. To date it has pulled in $523.8 million in the US alone. Given an average movie ticket price (yes, including 3D and IMAX) of $7.92, that means the total tickets sold to the movie are 66,136,363. Let’s just call that 66 million paid tickets to make things easier. And let’s assume 1/3 of those people just won’t pay for the movie even though they’re fans (like the Radiohead album). That would leave 44 million paying customers for Avengers.

Now, how much would those people pay for a copy of Avengers? I’m not saying just a ticket to see it once (which they did pay, on average, about $8 for). I mean a whole copy that they can watch again and again. New digital movies tend to go for $15 or $20 (not rental, outright purchases). That’s probably a good estimate for DVD prices as well since they have high variability. Going back to the Radiohead example, people paid 4 pounds on average for the free download while most new CDs in the UK are at the 9 pound price point. So let’s say that ratio holds and pay what you want prices would be around 45% (4/9, I did the math for you because I’m nice like that) of current retail pricing. Would 44 million people pay $6.75 (45% of $15) for a full copy of Avengers? I know I would pay more than that, but I think anyone could see the benefit of having a full copy of a brand new blockbuster for less than the price of a ticket. Heck, less than the price of a large popcorn.

If 44 million people paid an average of $6.75 that would net the Avengers $297,000,000. Take out the 10% and that’s $267,300,000. Avengers cost a reported $220 million to make, so it would already be profitable based on this take. And this is just the first month and just the US. Internationally it has made about 1.5 times the US box office, so that would be about $400 million more coming Marvel’s way. Actual profit, not money that would only be a profit to the studio. I think it works for incredibly expensive blockbusters.

The Flaws

Of course, just as there are flaws with the current copyright system, there are flaws with any system to replace it. The biggest one I see emerging from a copypay system is over derivative works and outright theft.

The derivative works flaw would be, for example, if someone wrote a story and then Hollywood made a movie without compensating the author. This is more an issue of moral outrage, since Hollywood is probably only going to use a successful story. And hopefully even if that did happen the author would be in a great position to make a deal with another studio for their next project (getting an advance copy so the studio can beat the others etc.). But there’s no denying that we would feel outrage over a giant studio taking advantage of an author and making a lot of money off their work (even though the studio needs to do a lot of work of their own to adapt and create it). In that case I think we would want to extend laws about unjust enrichment to cover these extreme situations, or possibly set up compulsory license amounts for transforming the work and then let the market snap up the successful authors whose works translate to other media.

Similarly, we would not want to create a system that rewards plain theft. For example, you write a book and start selling it–I simply copy your book and start selling in the hopes that I get a percentage of your customers. That’s not something we would want to reward and the unjust enrichment action mentioned before might help address the problem. But another way to address would be the copypay system itself–new digital content can be compared to pre-existing digital content to police the unjust enrichment.

Why Now

Social media has delivered on the promise of the Internet. In the 90s and into the 00s we had connected computers but we hadn’t developed the platforms to enable conversations. Sure, we had the start of it. Email. Chat rooms. Forums. Bulletin boards. But nothing like today with Facebook and Twitter and Tumblr and YouTube. We now have robust platforms for sharing content with each other.

Right now, the digital distribution networks for paid content have been like email–a digital recreation of an analog invention. We’re replacing Best Buy with iTunes, but we aren’t taking advantage of the new technology we’re just taking dollars from A and giving it to B. What we need is to realize the new capabilities available to us and the benefits it could bring–a world with more content, better content, more artists able to make a living off their art while their fans pay less for that art.

IMPORTANT DISCLAIMER

SoMeLaw Thoughts are entirely my own opinion about social media legal issues and not the statement, opinion, or in any other way affiliated with Dell.

This means I could be completely wrong about everything I post here. Sure, I’ve practiced for over ten years in technology law and have supported Dell’s social media team for a fair amount of time, but if you get five lawyers in a room and ask a question you’re likely to get seven different opinions. Oh, and it’s a really boring room. And someone will probably start quoting Latin. So I could be totally wrong here.

This is also not specific legal advice for you. I don't know you. Even if I know you I didn't write this for you, I wrote it for the blog and you're reading it. You want legal advice? Hire an attorney! A good one.